Tim Wu on the new monopolists: a “last chapter” for The Master Switch

13Nov

I reviewed Tim Wu's great history of media consolidation and regulatory capture The Master Switch earlier this month; now Tim says, "This piece I wrote for the Wall Street Journal is an important one. It is like a last chapter for my book."

We wouldn't fret over monopoly so much if it came with a term limit. If Facebook's rule over social networking were somehow restricted to, say, 10 years--or better, ended the moment the firm lost its technical superiority--the very idea of monopoly might seem almost wholesome. The problem is that dominant firms are like congressional incumbents and African dictators: They rarely give up even when they are clearly past their prime. Facing decline, they do everything possible to stay in power. And that's when the rest of us suffer.

AT&T's near-absolute dominion over the telephone lasted from about 1914 until the 1984 breakup, all the while delaying the advent of lower prices and innovative technologies that new entrants would eventually bring. The Hollywood studios took effective control of American film in the 1930s, and even now, weakened versions of them remain in charge. Information monopolies can have very long half-lives.

Declining information monopolists often find a lifeline of last resort in the form of Uncle Sam. The government has conferred its blessing on monopolies in information industries with unusual frequency. Sometimes this protection has yielded reciprocal benefits, with the owner of an information network offering the state something valuable in return, like warrantless wiretaps.